1. Overview 

A scheme of arrangement is a court-sanctioned statutory procedure under Part 18A of the Companies (Jersey) Law 1991 (the “CJL”). It enables a Jersey company to enter into a binding compromise or arrangement with its members or creditors (or any class of them). Schemes are flexible tools used for restructurings, mergers, takeovers, and debt compromises.

3. Procedure 

The process typically follows these steps: 

Application to Court

• The company, any creditor, member, or liquidator/administrator applies to the Royal Court for directions to convene meetings of relevant classes of members/creditors.

• The court considers whether the proposed classes are properly constituted.

Meetings of Members/Creditors

• Convened in accordance with court directions.

• Approval requires:

• Majority in number representing

• 75% in value of those present and voting in each class.

Court Sanction Hearing

• If class approval is obtained, the company returns to court.

• The Royal Court considers:

• Whether the statutory majorities have been satisfied.

• Whether classes were fairly represented.

• Whether the scheme is fair, reasonable, and one that an intelligent and honest person might reasonably approve.

• If satisfied, the Court sanctions the scheme.

Filing and Effectiveness

• The court order must be delivered to the Registrar of Companies.

• The scheme becomes binding on:

• All members/creditors of the relevant class, and

• The company itself.

4. Key Features 

• Binding Effect: Once sanctioned, dissenting minorities are bound.

• Flexibility: Used for debt restructurings, solvent reorganisations, or change-of-control transactions.

• Court Oversight: The Royal Court provides checks on fairness and process integrity.

• Cross-Border Recognition: Schemes are often recognised internationally, particularly in the UK and other common law jurisdictions, though recognition depends on local law.

5. Common Uses 

• Corporate restructurings: reorganising share capital or creditor arrangements.

• Takeovers: effecting acquisitions without using the squeeze-out provisions of Part 18 CJL.

• Debt restructurings: binding minority creditors in distressed scenarios.

6. Practical Considerations 

• Class composition is critical; improper classification can derail the scheme.

• Court’s role ensures transparency but adds cost and time compared with purely contractual arrangements.

• Timing: from initial application to sanction can take several weeks to months.

• Alternatives: mergers under Part 18B CJL or continuance into another jurisdiction may sometimes be more suitable.

7. Conclusion

Schemes of arrangement under Jersey law are a powerful and flexible mechanism for effecting restructurings and corporate reorganisations. With court supervision ensuring fairness and binding effect across classes, they remain a preferred tool in complex or cross-border transactions involving Jersey companies.